Senate Promises To Amend Tax Extenders Bill
On May 28, 2010, the House passed the American Jobs and Closing Tax Loopholes Act of 2010 (H.R. 4213) by a vote of 215-204. The bill now will go to the Senate as it returns to Washington the week of June 7.
After passage of the bill, House Ways and Means Committee Chair Sander Levin (D-MI) expressed a hope that the Senate would pass the House bill. He stated the bill has been “fully discussed between the House and the Senate” and believes that “it’s a bill they can accept.”
President Obama issued a press release in support of the bill. He stated, “I ask the Senate for its swift action on this passage so I can sign it into law and I urge Congress to move quickly on additional relief measures.” President Obama was making reference to his request for additional funds for unemployment benefits and added assistance to the states to avoid layoffs of “teachers, police officers and firefighters.”
The ranking Republican on the House Ways and Means Committee is Rep. Dave Camp (R-MI). He indicated that the current bill was “going nowhere.” In his view, Senate Majority Leader Reid will have the bill “totally rewritten in the Senate.” Rep. Camp called the bill a “$52.4 billion deficit-increasing, tax-hiking, job-killing plank.”
Senator Reid will now take up the tax extenders bill as the Senate resumes work on June 7th. He stated that the Senate “will change the bill” that has been passed by the House. However, he hopes that the changes will not “be major” and plans for a vote within the next week.
Editors Note: As frequently happens in election years, the passage of the tax extenders bill has been a protracted and difficult congressional process. While there still are differences, the bill (including the IRA charitable rollover) is now nearly certain to be passed in June. The Senate will make some changes in the tax increases passed by the House. If the House and Senate are able to come to agreement within the next 10 days, the bill will be passed and sent to the President by the third week of June. The final bill will include the IRA charitable rollover and six other tax extenders.
Grassley Predicts “Tremendous Upheaval” Over Estate Tax
Senate Charles Grassley (R-IA) is the ranking Republican on the Senate Finance Committee. In a conference call with several reporters on June 2, 2010, he discussed the uncertain future of the estate tax.
Sen. Grassley noted that Sen. Jon Kyle (R-AZ) and Sen. Blanche Lincoln (D-AR) have proposed that the Senate Finance Committee pass an estate tax bill with a $5 million per person exemption and a 35% top estate tax rate. However, Grassley expressed the opinion that “the Finance Committee would like to take up consideration of legislation, but we aren’t assured by the majority leader that the bill passed out of committee will be taken up on the floor.”
Under the Senate rules, even if the Finance Committee were to pass the Kyle-Lincoln estate tax compromise, Majority Leader Harry Reid (D-NV) is not obligated to schedule a floor vote and could simply stall the legislation.
In December of 2009, the House passed the Permanent Estate Tax Relief for Families, Farmers and Small Businesses Act of 2009. This makes permanent the 2009 estate exemption of $3.5 million and top estate tax rate of 45%. If the House and Senate are not able to take action on estate taxes by the end of 2010 then on January 1, 2011 the estate tax returns with a 55% top rate and an exemption of $1 million (plus indexed increases). If this were to happen, Sen. Grassley stated that there will be a “tremendous upheaval at the grassroots of America.”
Will Fiscal Commission Consider VAT?
The National Commission on Fiscal Responsibility and Reform continues to develop a comprehensive proposal to address the federal deficit. It has invited comments from members of Congress, leaders of all types of American organizations and private individuals.
James Q. Riordan, Sr. sent a letter this week to co-chair Alan K. Simpson, the former Senator from Wyoming. Mr. Riordan made four basic points about the fiscal problems and suggested a Value Added Tax (VAT) as a solution.
First, he indicated that there is too much “unaffordable spending.” Even with limited spending growth, the income tax cannot be sufficiently increased to pay for current and future proposed spending without doing damage to the economy and increasing unemployment….
Therefore, Riordan claims that the only potential solution is a VAT. However, because the VAT is a tax on consumption and would have great impact on middle and lower incomes, it needs to be accompanied by a progressive income tax.
His third point is that the new income tax would need to be very simple. In his view, there would be no deductions for home mortgage interest, charitable gifts or medical expenses.
Fourth, he would tax all income only once. There would presumably not be a corporate-level tax or an estate tax under this theory.
As the fiscal commission considers the options for reducing spending and increasing taxes, it has indicated that the current staff resources are inadequate. In response to a request by the commission, Senate Majority Reid sent a letter this week to the White House and requested additional staff support. The White House indicated that it will be pleased to “work with him” to provide additional assistance.
At a hearing on the financial challenges, Senator George Voinovich (R-OH) noted that the commission is under great pressure to develop an effective plan. He stated, “If we don’t get something out of that commission, we are over the cliff.”
Senate Budget Committee Chair Kent Conrad (D-ND) was the prime supporter of the commission. He stated, “This is not a time to impose austerity in my judgment.” However, he indicated that austerity will be necessary in the future, and that budget cuts and tax increases “must be imposed in a way that is convincing.”
Editors Note: Your editor and this organization take no specific position on VAT or other specific tax and spending recommendations by the Fiscal Commission. This information is offered because potential Fiscal Commission plans may affect many of our readers.